The Thompson Hotel Denver is a recent-build property owned by T2 Hospitality. Like many lifestyle hotels, they don’t just rely on room revenue to earn a profit. They lean heavily into food and beverage. And this hotel has a unique strategy for bumping up their revenue – by 3%.
As this charge slip from the hotel’s bar shows, they add an automatic 20% surcharge and pocket 3% of it for themselves. You’re not just required to tip the servers, you’re also required to tip the owners.
Growing up, 15% on the pre-tax total of a meal was a normal tip. Somehow that’s become 20% on the after-tax total. At this property, however, they’re adding 20%, but if you want to tip 20% you need to add an additional gratuity.
- They say they are doing it, so it’s not ‘fraud against the workers’ and actionable under law
- However it’s fraud against the consumers, because the menu prices aren’t the actual prices. Everything on the menu is 3% more than what’s actually listed.
During the pandemic, the Motif Hotel in Seattle (then a Hyatt, now Hilton) asked guests for donations. This wasn’t extra cash for a small business. It was extra cash for a Hong Kong-based investment group. But at least that was voluntary.
San Francisco’s Marriott Marquis was just dinged for pocketing $9 million in service charges that presented as benefiting workers. Two Hyatts in Los Angeles, including a Thompson property, are being investigated for adding service fees for restaurant workers and then pocketing the money. In those cases it appears the money is going to workers. Here the hotel has the audacity to say that it’s not – which is better legally but worse ethically.
A reader reports that the General Manager of the Thompson Hotel Denver defends the practice two ways,
- The hotel’s rising costs with no explanation for why this needs to be addressed by a percentage add-on fee, versus adjusting menu prices. Why do higher costs force a surreptitious response?
- A need to help employees with no explanation for how a mandatory 3% tip for ownership benefits employees in any way.
President Biden has come out against scammy mandatory fees. He’s not actually doing anything about them, preferring to simply campaign against them. And so the practice continues.
How outrageous!
On the one hand, the notice is math-challenged. In fact, 85% of the charge is distributed to the workers and 15% retained by the owners.
On the other hand, it is plausible that this 15% represent the cost of taxes and benefits associated with the 85%, e.g. FICA, Medicare and possibly retirement benefits.
If the charge is mandatory, then it should be in the price as is done in Europe. Same with resort fees, though in a weird way resort fees may benefit Globalist members since they are exempted.
Uneblievable!
@ Gary — I would refuse to pay.
It’s not outrageous. It’s deception and it’s greed. What is outrageous is that people will still book the property. The only way to stop this type of price gouging is to stop doing business with companies that do it. Wage and supply inflation are normal costs of doing business. All of this needs to be built into the price we pay. To add service charges, fees and even tips to the price is simply deception so that businesses do not have to raise the actual list price. The inflation we are seeing is corporate and shareholder greed. We cannot rely on the court or politicians to fix this problem. The solution is to not do business with these gougers.
@Gene – if it is disclosed prior to ordering (as appears to be the case) you have no option but to pay. If you refuse the hotel could call police and have you arrested for theft. Not saying I agree with this (although I always tip around 20% anyway so doesn’t change what I pay although I prefer it not go to management) but refusing to pay after you were made aware of the add on charge will not end well for you. If you don’t want to pay you should simply get up and leave once you see this will be added to the check – that is your only practical option.
Is anyone bringing this to Hyatt corporate’s attention? Seems really shady.
This should be a criminal investigation for fraud. A few felony convictions should put an end to this outrage. I would think that honest businesses who have to compete with tgese crooks would be up in arms too
@ AC — A bit over the top, no? Call the police. I’m quite sure they have some serious crimes to ignore instead.
@DaveS – if disclosed no illegal activity involved so brining up criminal (or even civil) charges is just stupid
@Gene – no more “over the top” than someone saying would refuse to pay something that they willingly agreed to since it was disclosed before the purchase was made. Agree likely wouldn’t call police but also wouldn’t let you “not pay”. If a guest would bill to card on file and if you try to dispute it they would reject the chargeback since it was fully disclosed.
Only way to address it would be through Hyatt and see if they would require hotel owners to do away with the charge.
Just CC transmission fees tbh
Does the Hyatt Place in downtown Denver do this same thing?
That’s where the FlyerTalk Moderator Do is taking place on the second Saturday in October this year. Hope there is no such surprise then.
There’s a whole argument here about disclosed and not disclosed and pay vs not pay. No point to argue without getting facts first.
What I really wonder is if this was disclosed and in which way. Do they have a sign at the entrance saying we charge 20% mandatory tip? Do they have it clearly and visibly posted in the menu?
Truth in advertising laws need to be applied so customers can compare total cost to total cost. Soon renting rooms will look like buying concert tickets, with an endless list of add on charges. Auto rental companies are guilty of this but usually tell you up front how much it will cost. To be fair, the 3% probably is the amount that goes to the credit card company.
I solve this problem easily. I pay but then NEVER return. I also tell my friends to avoid it.
It stops when people stop spending money here.
@Mike – people won’t stop spending there. Most people won’t even notice. Many that notice will just shrug. The only way to stop it is cause some kind of scandal.
IMHO the bigger issue here is mandatory character of the tip. If it is mandatory, it should be part of the price. Tip cannot be mandatory because it’s extra money to show appreciation of good work.
@Carl:
> On the other hand, it is plausible that this 15% represent the cost of taxes and benefits associated with the 85%, e.g. FICA, Medicare and possibly retirement benefits.
You missed worker’s comp. This is a realm where I have little experience but it doesn’t surprise me. 7.65% directly to Social Security/Medicare. I’m not succeeding in finding worker’s comp costs as a percentage, but from what I did find it’s a few percent of payroll.
While it doesn’t seem that there would actually be 15% in costs I find it likely that there are at least 10%–keeping 2% probably loses money, keeping 3% probably makes a little. Think they’re going to round up or round down???
If there are retirement benefits involved even 3% would be low.
The picture looks like a receipt, so disclosed only after consuming the product?
Also, the best way to get Hyatt for this might be for the companies expensing the charge to do an audit and see how much was paid by this addition. It could be a significant amount.
@ AC — You would be surprised what a little push back on corporate ripoffs will accomplish.
100% standard in every banquet event at every hotel ever if you’ve ever seen a banquet check, the idea at historic conception being since guests don’t tip at banquet events, the servers have little incentive for serve compared to a restaurant. The owners taking a cut of that has always seemed like a cash grab to me as well. It’s new on the restaurant outlet side though, again would be fine with this if they removed the gratuity line–but they don’t.
There many restaurants in Denver that apply a mandatory 20% tip. This is becoming common practice in Colorado. How the 20% is distributed to the server that assisted the table, the bus boys, bartender, hostess and kitchen staff is unknown and I would like to see the breakdown. In the past, servers would tip out the bartender and bus boys at the end of the night. I would like to see transparency where the 20% is allocated… Thoughts?
Only in the USA.
An the Republicans want this to become normal (deregulation and all)!
The US has truly descended into being a third world country.
Lol like all Hilton and Marriot and Hyatt hotels i got proof and was a diamond member,platinum member,and globalist also other issues wit suite night awards and changing prices after u paid for reservation and them not giving back the taxes after u stay 90 days by law
@Carl
“If the charge is mandatory, then it should be in the price as is done in Europe.”
Mandatory “service fees” are quite normal at restaurants in Europe. Much more so than in the U.S., actually. Though I completely agree that any “mandatory fee” that must be paid in order to purchase a product should be required to be included in the advertised price. But this is not the case in Europe.
The notice should be at the entrance to the facility, and in large print on a popup for any website owned by the property managers and hotel company. You should have to read the giant print, scroll down, check a box that says “Yes I’m a moron who supports this confiscatory nonsense and I accept this condition” before being allowed to book a room or a meeting facility.
One reason that I told IHG “buh bye” is that I filed a complaint regarding my stay at Holiday Inn Kensington Station in London. I sent letters to IHG Americas and IHG UK. The response, in one case, was, “…that is a property that is not owned by IHG and therefore we can’t control…”. HOLD IT A SECOND, that hotel flies your flag…your brand name on the marquee. You damn sure can control what they do! You choose NOT to! I bought enough extra IHG points with my Hilton AMEX card to get as close to 10,000 extra points to transfer all the IHG points to my airline frequent flyer account. I hope not to set foot in a IHG property again.
Agree there should be notice and likely is. However, not sure what you feel is crazy – the 20% (which anyone should leave as a tip anyway) or the 3% for management. As others have noted the 3% could be a credit card fee (or benefits on the 17% for the employee). With very few exceptions states allow merchants to add a fee for credit cards (or offer a lower rate for cash so the net impact is a fee for using credit cards) and many don’t require advance notice.
Not saying I necessarily agree with the practice but it is legal and mandatory tips and fees are becoming the norm in many places whether we like it or not. Only reasonable recourse would be to escalate through Hyatt to see if it is compliant with their policies (or if they restrict hotel owners from implementing such charges)
Thanks! Another hotel added to my do not stay list.
Here is the front desk managers email:. stayindenver@thompsonhotels.com lol
Just emailed them to comment on this.
Honestly, as long as this is disclosed up front, it doesn’t bother me. I travel a lot in Asia where either tips are culturally not a thing (Japan) or “++” is the standard at high end hotels/restaurants (Thailand, Bali). In the later two countries, they’ve tacked on a a17% and 21% surcharge (includes tax and gratuity) for years.
In the US, anything that looks like a tip is one in my book, and I’m *not* adding anything on top of it. I also don’t give a fig *what* management does with it. If they call it a tip and don’t distribute it to the workers, that a complaint for some lawyer to take up with the labor board.
I’m not sure how good of a deal a hotel can get on credit card processing fees, but with cash-back rewards of two percent on certain cards certainly require fees higher than that. One wonders if the hotel would be willing to drop their 3% on a debit card run as debit, or cash. The hotel is certainly paying the transaction fee on the base charge and tip, so on higher reward cards, this isn’t too far off from the maximum they might pay. Some states allow deducting transaction fees from tips, which is a similar consideration. Yes, I know the argument that lowering transaction fees won’t decrease prices, but in this case it might, unless it’s covering the owner’s share of FICA on the tip..
Bad Hotel Review
Bad Google Review
Bad TripAdvisor Review
Bad any where else review.
I am the customer, not the employer. It is the employer’s responsibility to pay for payroll taxes and wages NOT the customer.
I am the customer, not the shareholder. IT is the shareholder’s responsibility to pay for transaction costs NOT the customer..
I live in downtown Denver. Eat somewhere else. You’re spoiled for choice.
It’s laughable to think the police will be called. They don’t have enough resources to fight real crime here.
Also event banquet servers at hotels aren’t tipped because they make far more than restaurant servers wages. I worked at 4 major hotels in Denver in banquet mgt and staff are paid accordingly as if they will not be tipped. (A hotel restaurant does not fall under banquets and the wage is different).
So I just checked, and nowhere on their website policies or their restaurant sub pages do they list this policy. It’s not on the Internet menus. I live down the street and am curious if you find this out only once you’ve been seated….
@Alfie G – doesn’t matter. If on the menu or a sign as you enter restaurant that is fine. Also CO law may not require any notice.
This is the same fleecing of customers that ClubCorp does to it’s members. ClubCorp’s reputation for customer (member) service and employee relations is so bad that they’ve had to change their name to Invited Clubs. Perhaps the Invited owners, Apollo Global Management, does the same with it’s other holdings such as cruise lines, hotels and Sun Country Airlines.
Actually “The President isn’t doing anything” because he doesn’t make laws, he signs them and can of course ask Congress to present one to him, which he has done. At last I noticed he’s the only one even advocating such a thing.
They should strike. Or better. UNIONIZE.
As long as it is fully disclosed before purchase, a mandatory service charge can be collected by a merchant, with the money being treated as general revenue and distributed as they see fit. The fact that Thompson says how it will be distributed doesn’t change this.
Here is what NOLO says about the issue:
Some restaurants tack a “mandatory service charge” on to bills for large tables of diners, private parties, or catered events. Under federal law and in most states, this isn’t considered a tip. Even if the customer thinks that money is going to you and doesn’t leave anything extra on the table, your employer can keep any money designated as a “service charge.” The law generally considers this part of the contract between the patron and the establishment, not a voluntary acknowledgment of good service by an employee. Many employers give at least part of these service charges to employees, but that’s the employer’s choice: Employees have no legal right to that money.
In Colorado, the quick serve chain Tokyo Joe’s posts a similar policy on the wall, within view of the register where customers finalize purchases. Tips added during a credit card transaction (not sure about the tip jar) become the property of the company and will be distributed as they choose.
Guests at any restaurant where tipping is done at a general register should assume that some or all of the money is going to the general fund, since there is no traditional server involved with the transaction.
I suggest that if one wants to tip a worker, that it be done directly, and in cash.
The 3% retained by the property is to cover the credit card processing fees, poor way of explaining that though.